Court of Appeal (Qld)|1995-10-10|Before: Before McPherson J, Thomas J, Williams J

Tamwoy v Solomon [1995] QCA 447 (10 October 1995)

This is an application by the respondent to this appeal, who was the plaintiff at trial in the Supreme Court at Brisbane, for an order under O.26 that the respondent's costs of the appeal be taxed on a solicitor and client basis. The action arose out of a head-on collision which occurred on 13 September 1986 on the Bamaga-Umagico Road at Cape York between a utility being driven north by the appellant and a motor cycle being ridden south by the respondent, as a result of which the respondent was seriously injured.

In the course of the trial the quantum of the respondent's damages was agreed at $800,000, leaving for determination only the issue of liability. As to that, the learned trial judge apportioned responsibility equally, thus reducing the respondent's damages by 50% on account of his share of the blame. On 31 March 1995 judgment was given for the respondent for $400,000 with costs. The costs were ordered to be taxed on a solicitor and client basis, from which it may be inferred that the plaintiff had made an offer to settle under O.26 of the Rules of the Supreme Court.

The appeal was instituted by a notice of appeal dated 21 April 1995. It challenged the decision at trial claiming that liability ought to have been apportioned "principally against the plaintiff, although with some degree of negligence on the part of the defendant ...". The appeal was heard in this Court on 12 September 1995. On the same day it was unanimously dismissed with costs, with each member of the Court delivering ex tempore reasons of his own.

After the appeal had been dismissed, Mr Callinan Q.C., who led for the respondent, applied for an order that the costs of his client be taxed on a solicitor and client basis. The application was opposed by Mr Clifford Q.C., who appeared for the appellant. Counsel agreed to present written submissions on the matter at a later date, which has since been done. From the material accompanying those submissions, it emerges that on 22 May 1995 the appellant (calling himself "the defendant") acting under O.26 made an offer to settle the appeal on the basis of a payment to the (respondent) plaintiff of $280,000 damages, together with party and party costs and outlays to be agreed (or, in default, taxed) to the date of the offer, in full satisfaction of the plaintiff's cause of action. Paragraph 4 of the offer to settle added that the sum in question was inclusive of amounts which the plaintiff was bound to refund to the Workers Compensation Board, the Department of Social Security, and any other person or entity. Nothing was said about interest accruing on the judgment sum pursuant to s.73 of the Common Law Practice Act. It follows that interest was intended to be foregone as part of the compromise being offered.

The respondent (calling himself the plaintiff) responded with an offer to settle of his own dated 31 May 1995. In it he offered to settle the appeal on the basis of a payment to him of the judgment sum of $400,000 and his costs of the trial of the action on a solicitor and client basis "and that each party bear their own costs of the appeal to date". The offer was also expressed to be made under O.26 and to be an offer to settle the plaintiff's claim against the defendant.

The central question is whether O.26 applies to an appeal. Order 26 of the Rules of the Supreme Court was adopted in 1988, replacing the existing O.26, which had provided for payment into court. Paragraph (c) of the Rule of Court incorporated in the Order in Council by which the substitution was effected provides that the new Rule does not apply to an action in which, at the date of commencement of the new O.26, money had been paid into court, to which the old O.26 was to continue to apply: Queensland Government Gazette, 9 April 1988 at 2081. Although the plaintiff's cause of action arose before that date, the action itself was instituted by writ issued on 8 August 1988. The alteration is procedural and there is no doubt that the new O.26 applies to it.

The underlying purpose of O.26 is to encourage settlement rather than litigation of claims. This policy is given effect in O.26, r.2 by providing that a party may serve on another party an offer to settle a claim, specifying a period expiring not less than 14 days after service during which the offer is open for acceptance: O.26, r.4. There is an effect on costs if the offer to settle is not accepted. Rule 9 of O.26, provides, so far as material, as follows:

"9.(1) Where the plaintiff makes an offer to settle which is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle the Court shall order the defendant to pay the plaintiff's costs, fixed on a solicitor and client basis, unless the defendant shows that another order for costs is proper in the circumstances.

(2) Where the defendant makes an offer to settle which is not accepted by the plaintiff and the plaintiff obtains a judgment which is not more favourable to the plaintiff than the offer to settle the Court shall order the defendant to pay the plaintiff's costs, fixed on a party and party basis, up to and including the day of service of the offer to settle, and order the plaintiff to pay the defendant's costs, fixed on a party and party basis, after the day of service of the offer to settle, unless the plaintiff shows that another order for costs is proper in the circumstances."

The provisions of O.26, r.9(1) therefore set up a kind of wager or competition, in which, if the plaintiff wins it, the prize is costs on a solicitor and client basis; while if the defendant wins it, the prize under O.26, r.9(2) is party and party costs, which would otherwise have been awarded to the successful plaintiff and not the defendant. The utility of the two sub-rules is, it may be thought, principally, but not exclusively, in the area of disputes over quantum of damages.

As can be seen from the print of O.26 in the Queensland Government Gazette, the provisions of that Order were for the most part derived from O.49 of the Ontario Rules and O.26 of the Victorian Rules of Court. In Victoria the rule which corresponds to Qld. O.26, r.9 is O.26.08 (Vic.). It is introduced by a sub-rule (1), which confines the operation of O.26.08 to an offer of compromise "which has not been accepted at the time of verdict or judgment". This has prompted the suggestion that the operation of the procedure in Victoria is limited to an offer of compromise of proceedings at trial: Williams' Civil Procedure, Victoria, vol.1 s26.01.62. There is a comparable limitation in Qld. O.26, r.3, but not in Qld. O.26, r.9, which is the critical provision so far as costs are concerned. It is therefore not possible to apply the same reasoning with equal force to Qld. O.26, r.9.

The provisions of sub-rules (1) and (2) of Qld. O.26, r.9 are, materially, indistinguishable from sub-rules (1) and (2) of Ontario R.49.10. In Niagara Structural Steel (St. Catherines) Ltd. v. W.D. Leflamme Ltd. (1987) 58 O.R. (2d) 773, the Ontario Court of Appeal held that Ont. R.49, r.10 had no application to the costs of appeals. The authority of that decision was acknowledged by the same Court in Hamilton v. Canadian National Railway (1991) 80 D.L.R. (4th) 470, 475, but the Court nevertheless exercised its ordinary appellate jurisdiction over costs to order, in the particular circumstances of that case, that the plaintiff respondent's costs of appeal should be allowed on a party and party basis as from the date of an offer, made after the appeal was instituted, to settle the action for substantially less than the amount of the judgment at trial which was reduced on appeal below the level of that offer.

In the Niagara case the Court said there were several reasons for holding that Ont. R.49.10 did not apply to offers to settle made pending appeal. The first was that the terms "plaintiff", "defendant" and "obtains judgments", which appear in sub-rules (1) and (2) of O.R.49.10, "were not really apt to describe the roles of the parties" (58 O.R. (2d) 773, 779). Their Lordships went on to say:

"While these terms ill fit the appellate process they do not necessarily stand in the way of the application of rule 49.10 to appeals. When functional considerations, however, are taken into account they do have this effect."

What was meant by functional considerations was that:

"At the first instance level, the trial of an action or hearing of an application, there is a balance between subrules (1) and (2) of rule 49.10. Each of them provides an incentive in the form of a costs sanction. If the judgment obtained by a plaintiff is as favourable or more favourable than the plaintiff's offer the plaintiff is entitled to the added benefit of the solicitor-and-client costs provided for in rule 49.10(1). If the judgment obtained by a plaintiff is as favourable or less favourable than the defendant's offer then the defendant benefits from the combination of the plaintiff's being deprived of his costs after the date of the offer (where in the absence of an offer, it may be assumed, he would have been entitled to costs because he obtained a judgment in his favour) and the defendant is entitled to costs after the offer ...."

The Court considered that the balance is lost when it is sought to apply the scheme to appeals. They used the illustration of an appeal where a defendant appellant succeeds on appeal in reducing the amount of an award in favour of a plaintiff, where the terms of the defendant's appeal offer are more favourable to the plaintiff than the result on appeal. There would, they said, be no benefit to the appellant in such a case because there was nothing in r.49.10(2) that improved his position with respect to costs beyond what it would ordinarily be, which is that, as a successful appellant, the defendant would be awarded his costs of appeal on a party and party basis (58 O.R. (2d) 773, 780). They added that it would be an unwarranted interpretation of O.R.49.10(1), which was concerned with plaintiffs' offers, to hold that all appellants, whether plaintiffs or defendants, should be regarded as plaintiffs for the purpose of O.R.49.10(1).

Finally, the Court did not consider that their conclusion was affected by O.R. 49.03, which, because it referred to an offer of settlement being made "at any time", might be viewed as a basis for arguing that an offer under Rule 49 might be made pending appeal. They rejected this argument because they considered the better view to be that "the words confer the right to make an offer at any time before the giving of judgment by a court of first instance", and that they did not extend the right beyond that point.

The expression "at any time" appears in the corresponding Qld. O.26, r.3(1); but it is a rule which, like Vic. O.26.08(1), speaks of an offer being served "at any time" before verdict is returned in the case of a jury trial, or before the judgment is given where the trial is by any other mode. Plainly, therefore, it is confined to proceedings at first instance and is not a consideration capable of supporting an argument that an offer to settle may under the rule be made after judgment pending appeal. To that extent, the provisions of the rules in all three jurisdictions coincide.

The real question in the present context is whether Qld. O.26, rr.10(1) and 10(2) have an appropriate operation on appeal. We are, with respect, impressed by the reasoning of the Court of Appeal in the Niagara case. The example given of a defendant successfully appealing against the quantum of damages awarded is persuasive. If he continues to be viewed as the "defendant" on appeal, he cannot derive any benefit under O.26, r.9(1) because it is only he, the defendant, who is vulnerable to an order for costs on a solicitor and client basis under that sub-rule. Equally, however, he gains no advantage by himself making an offer of settlement. Order 26, r.9(2) does not provide for a defendant to be awarded costs taxed on a solicitor and client basis. It provides only for plaintiff to pay the defendant's costs on a party and party basis after service of the offer to settle. Because a successful defendant will ordinarily obtain an award on a party and party basis of the whole of his costs of appeal, he could not benefit if O.26, r.9(2) applied to the costs of such an appeal. That is what was meant by the Court in the Niagara case in saying that there was nothing in the terms of the Ontario rule corresponding to Qld. O.26, r.9(2) "that improves his costs position over this", which is why it was said that "the balance is lost when it is sought to apply the scheme [of O.26] to appeals" (58 O.R. (2d) 773, 780).

Order 26 therefore cannot be made to operate in a reciprocal or even-handed way to both a plaintiff and a defendant on appeal. Applying it would provide a sanction against futile appeals by defendants but not by plaintiffs. It would thus tend to defeat the policy of O.26, which is to discourage litigation generally and to encourage settlement of claims. This conclusion is not affected by resorting to the definitions in s.1 of the Judicature Act 1876. Those definitions are expressly incorporated into the Rules by O.1, r.1 of the Supreme Court Rules. Section 1 of the Act provides that "plaintiff" includes "every person asking any relief ... against any another person by any form of proceeding whether the same be taken by ... motion ... or otherwise". The word "defendant" is defined to include "every person .... served with notice of or entitled to attend any proceedings". An appeal is a proceeding by or on motion to the Court, a notice of appeal being simply a notice of motion by way of appeal. Applying the definition of "plaintiff" in s.1 of the Act has the consequence in the present case that the defendant in the action becomes the "plaintiff" for the purpose of this appeal. It is the defendant who was asking for relief here, in the form of a reduction in the amount of the judgment against him, against another person, namely the plaintiff. Equally, in terms of s.1, it is the plaintiff in the action who becomes the "defendant" on appeal. He is a person who, having been served with the notice of appeal, is entitled to attend the proceedings on appeal.

The difficulty in adopting this interpretation is that it simply reverses the impact of O.26, r.9(1) and (2). Instead of discriminating against the original defendant, if he is the appellant, in the manner described in the Niagara case, it now operates indiscriminately against the original plaintiff. To apply the definitions in s.1 of the Judicature Act to O.26, r.9(1) and (2) therefore does not solve the problem. The point is demonstrated in a case like this where both parties to the appeal have given notices under O.26. The risk of incurring an award of costs on a solicitor and client basis ought to be the same for each of them on the appeal; but, since they cannot at the same time both be the "plaintiff" within the meaning of O.26, r.9(1) on appeal, that particular sub-rule operates differently according to which of them happens to be the appellant or "plaintiff". This invests the procedure under O.26, r.9(1) with a mechanical operation, which has little or no relation to the real risks of the litigation on appeal.

We were pressed with the decision of the New South Wales Court of Appeal in Maitland Hospital v. Fisher (No. 2) (1992) 27 N.S.W.L.R. 721. There the Court decided that the words "plaintiff" and "defendant" retained the meanings each of them had in the proceedings at first instance, with the consequence that r.17(4) of Pt.2 of the Supreme Court Rules (N.S.W.) (which is the equivalent of Qld. O.26, r.9(1)) was capable of continuing to be applied on appeal in favour of the party who was the plaintiff in the proceedings at first instance. The Court was assisted to its conclusion by r.2 of Pt.51 of the Rules, which expressly extends their provisions (including r.17(4) of Pt.2) "so far as applicable" to proceedings in the Court of Appeal. A similar but more general provision appears in the Preamble to the Queensland Rules of the Supreme Court 1900, which are expressed to apply so far "as they are applicable" to proceedings in the Court "in all its jurisdictions". However, in Queensland there are particular provisions in O.91, r.89 (which deal with offers to settle the costs of proceedings) and O.91, r.77A(3) (which deal with consequences of the failure to accept such on offer). These two rules were inserted only in 1993, which suggests that, where the intention was to apply a rule like O.26, r.9 to a particular jurisdiction, the Rules expressly so provide. That step has not been taken in the case of appeals.

Furthermore, in the Maitland Hospital case the Court of Appeal also discovered reasons of policy as well as interpretation for holding not only that the offer of settlement rule was not displaced and so did apply on appeal, but that the rule should operate on appeal differentially in favour of plaintiffs, and not defendants. The latter were said to be "frequently corporations and ... often represented, upon subrogation, by their insurers". More importantly, the Court went on (27 N.S.W.L.R. 721, 726-727):

"... if no differentiation were made between the plaintiff and the defendant the only pressure on the defendant to settle would be the pressure which is inherent in litigating in any event. The defendant is entitled, if the plaintiff fails at trial, ordinarily to recover its costs. Without differentiation an offer to settle would not of itself induce a defendant to settle ... This differentiation helps to explain the different rules adopted in the Divisions in respect of offers of compromise by respectively, 'plaintiffs' and 'defendants'."

We are, with respect, not persuaded that this reasoning affords a sufficient basis in law or justice for departing from the ratio of the decision in the Niagara case (which was not cited to the New South Wales Court of Appeal) that O.26 has no application to appeals. If considerations of financial strength are relevant, not all defendants are corporations or are known to be subrogated insurers. The discretion to refuse an order for solicitor and client costs under O.26, r.9(1) is limited. Such an order must be made in favour of the plaintiff "unless the defendant shows that another order for costs is proper in the circumstances". That suggests that making "another" order will be exceptional, and may require detailed scrutiny of events, including the conduct of the litigation, going back over many years. The form in which an appeal reaches this Court, and the way in which the Court is constituted from time to time, do not readily lend themselves to thorough investigation of such matters, which often go beyond the material in the appeal record before the Court.

It was submitted that, quite apart form the provisions of O.26, the matter was one in which the general discretion ought to be exercised in favour of awarding the costs of appeal on a solicitor and client basis. Reference was made to Calderbank v. Calderbank [1976] Fam.93; but that decision does not bear upon the circumstances in which costs are awarded on a solicitor and client basis. In Union Bank of Australia v. Raine (1893) 5 Q.L.J. 117, Chubb J. held there was no jurisdiction to make such an order in an action at common law. Even if that might now be regarded as taking too narrow a view of this Court's discretion over the costs of an appeal, the circumstances of the present case are not such as to call for an order for costs on a solicitor and client basis. An appeal against an apportionment of liability based on an assessment of contributory negligence at the trial at once confronts the difficulty that the judgment under appeal involves an individual choice or discretion as to which there may well be differences of opinion by different minds. See Podrebiserk v. Australian Iron & Steel Pty. Ltd. [1985] HCA 34; (1985) 59 A.L.J.R. 492, 493-494. As the High Court said there, such a finding, if made by a judge, is not lightly reviewed.

In the present case there is no reason to suppose that the appeal was instituted and maintained simply in order to accumulate costs for the benefit of the legal profession. Although it failed, the judgment at trial was fairly open to challenge, and the reasons of the members of the Court for dismissing were not identical. The case is not one like Hamilton v. Canadian National Railway (1991) 80 D.L.R. (4th) 470, 475, where two or more years had elapsed from the date at which the offer was made to the appellant. In view of the comparatively short time that has passed since the offer was made here, it would have little if any impact on the incidence of costs if an order were to be made in terms similar to the order in Hamilton v. Canadian National Railway.

We would refuse the application for an order that the costs of appeal be awarded on a solicitor and client basis.

APPLICATION FOR AN ORDER THAT THE COSTS OF APPEAL BE AWARDED ON A SOLICITOR AND CLIENT BASIS REFUSED.

CATCHWORDS CIVIL - COSTS - Order 26 Rules of the Supreme Court - Offer to settle - Whether O.26 applies to an appeal - Ontario R.49.10 - Niagara Structural Steel (St. Catherines) Ltd. v. W.D. Leflamme Ltd. (1987) 58 O.R. (2d) 773.

I.D.F. Callinan Q.C., with him M.P. Kent, for the respondent

Tamwoy v Solomon [1995] QCA 447

At a glance

Court

Decision date

Before

Source

Judgment (33 paragraphs)

Tamwoy v Solomon [1995] QCA 447 (10 October 1995)

Parties